Brexit - Nine months to go and uncertainties galore

The United Kingdom of Great Britain and Northern Ireland (UK) left the European Union at the end of January 2020, but will still be treated as an EU Member State until the end of this year 2020. The EU and the UK have each put forward a draft for the future relationship and each has publicly advocated different visions for the future "EU-UK partnership".

The combative stance of some protagonists is certainly not conducive to finding an agreement on post-divorce relations. The UK Government under Boris Johnson has hardened or even reversed the UK position in a way that leaves the EU perplexed, fearing that economic rationality is being sacrificed on the altar of Brexit idolatry. The EU's insistence on a level playing field and effective judicial control does not make the negotiations easier for the UK.

Given that the resulting agreements need to be formally accepted by all EU Member States (which, for instance, means by the three regions in Belgium), the negotiations should be concluded before this summer. If no agreement can be reached in time, the result could be a hard Brexit; this may indeed be the undeclared wish of some Brexiteers. The current crisis complicates the negotiations and their timing.

The EU tabled a comprehensive trade agreement text, running over 440 pages, and covering all matters falling under EU competence, from a complete free trade agreement on goods to services (appearing to be more far-reaching anything the EU has offered to date) and the continued participation of the UK in EU programmes.

The UK’s approach is different as it proposes separate agreements for a number of issues. It sent a draft to the EU negotiators (requesting it not to be published or shared with other persons). The UK approach does not entertain the concept of an overarching framework. The EU insists on a governance structure encompassing all matters, allowing for judicial control and the evolution of the rules over time; it is adamant that a repeat of the patchwork of agreements binding the EU and Switzerland must be avoided.

While there are many issues of common interest, the differences on some key issues, from the operation of a border between the Republic of Ireland and Northern Ireland to fisheries, governance and a long-term level playing field, are far from being easily bridged.

Moreover, the new Government’s reneging on previous commitments, such as the UK Government’s U-turn on the Unified Patent Court or leaving the European Union Aviation Safety Agency (EASA) responsible for aircraft certification, sows doubts on the consistency and earnestness of the UK Government in negotiating the framework. Ironically, the UK representative who formally ratified the UPC was the then foreign secretary, now Prime Minister Boris Johnson, and the UK would have been one of the main beneficiaries of a unified patent system.

Nine months to go to real Brexit, but it is still not possible to anticipate what precisely will be agreed. It is even possible that nothing will be agreed on at all. This entails serious risks and challenges for companies. In addition, the health crisis may force the parties to change the timetable or even to their negotiation objectives.

The range of risks resulting from the UK's withdrawal from the EU is broad and the impact depends on the activities concerned, be it sale of goods, cross-border manufacturing operations, providing services or maintaining a commercial or manufacturing presence in the UK or the EU27. Irrespective of the outcome of the negotiations, it is certain that Brexit will generate additional costs and challenges for all economic operators, both in the UK and in the EU27. As the outcome of the future framework remains unclear, businesses need to prepare themselves by identifying and addressing risks in advance. BEITEN BURKHARDT will support you in finding the right commercial answer to all issues arising out of Brexit.

Dr Rainer Bierwagen